Sequential negotiations with costly information acquisition |
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| Institution: | 1. ENSIAS, Mohammed V University of Rabat, Morocco;2. International University of Rabat, FIL, TICLab, Morocco;1. Electrical Engineering Department, King Abdullah University of Science and Technology, Thuwal, Saudi Arabia;2. Department of Civil, Architectural and Environmental Engineering, University of Texas Austin, USA;1. Computer Science and Artificial Intelligence Laboratory, Massachusetts Institute of Technology, Cambridge, MA 02139, United States;2. IBM Research, 7 Changi Business Park, Singapore 486048, Singapore |
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| Abstract: | Negotiations about a merger or acquisition are often sequential and only partially disclose to bidders information about each otherʼs bids. This paper explains the seller optimality of partial disclosure in a single-item private-value auction with two bidders. Each bidder can inspect the item at a nonprohibitive cost. If a revenue-maximizing seller cannot charge bidders for the information about the otherʼs bid, then the seller optimally runs a sequential second-price auction with a reserve price and a buy-now price. The seller prefers to keep the bids confidential and, sometimes, to hide the order in which he approaches the bidders. |
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| Keywords: | Sequential negotiations Buy-now price Strategic bid disclosure |
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